Greg Schwartz Walter vs. Ford Motor Company, et.al.

FMC cites to numerous federal cases asserting that dealerships are not agents of manufacturers; however, California courts “are not bound by federal decisions on matters of state law.” (Haynes v. EMC Mortgage Corp. (2012) 205 Cal.App.4th 329, 335; see also Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 770 (stating that “decisions of federal courts in matters of state law are not binding on state courts”).)

Moreover, the first amended complaint (“FAC”) alleges that FMC entered into a warranty contract with plaintiff Gregg W. Schwarzwalter (“Plaintiff”). (See FAC, ¶ 7.)

Citing to Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, FMC argues that the FAC “fails to identify any individual authorized to speak on Ford’s behalf during the sale... [or] a single individual with knowledge that any representations were false and/or who concealed information, or who acted with intent to induce reliance.”

However, while FMC is correct that, as general rule, each element in fraud cause of action must be pleaded with specificity (see Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 645 (stating that “[i]n California, fraud must be pled specifically”); see also Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519 (stating that “[e]ach element in a cause of action for fraud or negligent misrepresentation must be factually and specifically alleged”)), this specific pleading requirement is significantly relaxed in the case of fraud by concealment or omission because, as one court has explained, “[h]ow does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?” (Alfaro v. Community Housing Imp. System Planning Ass'n., Inc. (2009) 171 Cal.App.4th 1356, 1384.)

Additionally, one of the purposes of the specificity requirement is to provide “notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 838.)

Therefore, when “it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy, even under strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party....” (Id.; see also Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 931 (stating that “plaintiffs did not have to specify the ... personnel who prepared these documents because that information is uniquely within ... [defendant’s] knowledge”).)

It is clearly not necessary for Plaintiff to allege the identity of persons who allegedly concealed facts, as that information is uniquely within FMC’s knowledge. (See Alfaro, supra, 171 Cal.App.4th at pp.1384-1385 (stating that “[t]o afford defendants adequate notice of plaintiffs’ claims, it does not appear necessary to require... plaintiffs to allege each occasion on which an agent of either defendant could have disclosed the restrictive deed... [s]urely defendants have records of their dealings with the plaintiffs... ‘[t]hose details... are properly the subject of discovery, not demurrer”).)

As to the lack of an allegation of “what specifically [was] said or wr[itten], or when the representation was made,” FMC fails to understand that “[t]his statement of the rule... is intended to apply to affirmative misrepresentations.” (Alfaro, supra, 171 Cal.App.4th at p.1384 (also stating that “it is harder to apply this rule to a case of simple nondisclosure... [h]ow does one show ‘how’ and ‘by what means’ something didn't happen, or ‘when’ it never happened, or ‘where’ it never happened?”)

Moreover, in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, the court concluded that allegations that the 2013 Nissan Sentra contained a defective transmission, that Nissan had exclusive knowledge of the defect and concealed and failed to disclose that information, that Nissan intended to deceive plaintiffs by such concealment, that plaintiffs would not have purchased the vehicle had they known of the defects and that plaintiffs suffered damages in the form of money paid to purchase the car, were sufficient to state a cause of action for fraudulent concealment. (Id. at p.844.)

Here, the FAC contains similar allegations regarding the subject vehicle’s transmission (see FAC, ¶¶ 14-42, 71- 85); the sixth cause of action alleges facts with sufficient particularity.

Citing Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, FMC lastly argues that the economic loss doctrine bars the sixth cause of action. The Rattagan court stated that “under the economic loss rule, tort recovery for breach of a contract duty is generally barred... unless... [a] plaintiff [can] demonstrate the defendant's injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when they entered the contract... [and that] the defendant's conduct... caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed.” (Id. at pp.20-21.)

However, Rattagan itself expressly stated that “the economic loss rule does not apply to limit recovery for intentional tort claims like fraud. The doctrine only applies to bar tort recovery for negligently inflicted economic losses unaccompanied by physical or property damage under the limits recognized in Sheen.” (Rattagan, supra, 17 Cal.5th at p.38 (also stating that “Can a plaintiff assert an independent claim of fraudulent concealment in the performance of a contract? The answer to this question is also yes... [a] plaintiff may assert a tort claim for fraudulent concealment based on conduct occurring in the course of a contractual relationship, if the elements of the cause of action can be established independently of the parties‘ contractual rights and obligations and the tortious conduct exposes the plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the agreement...

California case law similarly has viewed fraud by concealment on equal footing with fraud by affirmative misrepresentation”).)

The Rattagan court merely confirmed its prior statement in Erlich v. Menezes (1999) 21 Cal.4th 543, that “[t]ort damages have been permitted in contract cases... where the contract was fraudulently induced... [because] the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich, supra, 21 Cal.4th at pp.551-552.)

Here, the right to be free from the intentional concealment of material facts regarding the purchase of a vehicle is separate from the contractual rights of a warranty, and the fraudulent inducement of a contract is beyond the reasonable contemplation of parties in entering a contract. FMC’s argument regarding the economic loss rule is plainly without merit.

FMC’s demurrer to the sixth cause of action for fraudulent inducement—concealment is OVERRULED in its entirety.

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